The SASC recently held a hearing on theHealth of the Defense Industrial Base. The witnesses were Ms. Ellen Lord, former USD(A&S) and President/CEO of Textron Systems and Mr. David Berteau, President/CEO of the PSC and former ASD/LMR. I wanted to highlight some of their key remarks for increased visibility.

Chairman Jack Reed

• I am concerned by the impact of the long-term trend in consolidation of private companies participating in defense research, development, and acquisition, especially since the Cold War drawdown in the 1990s.
• Competition within the defense industry is vital to fostering innovation, delivering products and services in a timely and efficient manner, and keeping costs in check.
• 但是，在过去的三十年中，国防部门已经大量合并，从51个航空航天和国防总承包商过渡到只有5个。
• That has unintended consequences on costs, barriers to entry for new companies, displacement of established technologies with new, innovative capabilities, and the overall buying power of the Federal Government.
• The procurement and acquisition practice of the DoD and the Federal Government are often convoluted, poorly communicated, and burdened with inertia that makes contracting with private industry far too difficult.
• As America confronts threats around the globe that are evolving at unprecedented speeds, we must find a way to better identify our defense needs, communicate them, and deliver them in a timely manner.
• 缺乏响应迅速和快速扩展的生产能力，例如Stinger和Javelin导弹，突出了我们的计划因素的问题，并在短时间内需要对长期长后项目制造灵活性，几乎没有高级警告。
• Finally, a highly skilled workforce is necessary for designing, engineering, and employing the game-changing technologies of the future. As we seek to keep pace with our strategic competitors, it is imperative that we invest in facilities, training, and education to support our defense industrial base workforce.

Sen Inhofe

• Today, the arsenal of democracy is a husk of its former self. While many companies still use equipment from the early Cold War, the weapons and equipment they manufacture have fundamentally changed, as has the workforce.
• We have far too many single points of failure. We have brittle supply chains. We have hundreds of production contracts at minimum sustaining rates. We have persistent funding shortfalls across the board, but particularly in our workforce development.
• 特别是，我们武装乌克兰的尝试揭示了我们的许多脆弱性，从不足的弹药库存到缓慢的生产时间和令人难以置信的官僚障碍，尤其是在与盟友和合作伙伴开展业务方面。

Ms. Lord

• In order for business to survive and flourish there must be a clear demand signal and a fast pace of predictable development, production, and sustainment.
• 技术创新现在主要是由商业部门驱动的，国防部必须加速其对业务实践的采用，从而能够快速测试和实施新能力。
• Many authorities that have been provided by recent NDAAs have been translated to policy and implementation guidance by the Department. These authorities need to be exercised so that the acquisition process moves at the speed of relevance.
• It requires leadership, from both Congress and DoD, to ensure that the DoD workforce embraces the imperative to conduct business in a manner that encourages patriotic individuals and companies to participate in our national security ecosystem, versus driving them away through frustration over slow decision-making and acquisition ambiguity.
• Appropriations must allow flexibility to adjust to technical innovations with reprogramming that meets our warfighting needs, not only of our nation but of our allies and partners. Disruptive market conditions, such as inflation, must be dealt with at the top-line budget level instead of slogging through the bureaucracy of each contract being adjusted by individual contracting officers at each geographic location.
• 我们应该使用在13806 Industrial Base Reportin 2018, to identify sole-source supplies of critical supply chain items to begin to build our supply chain resilience.
• 鼓励部门使用这些人能够更快地采取行动需要强大的领导才能。因此，工具就在那里，但是我相信领导人必须要求部门负责展示他们的使用方式其他交易当局,middle tier of acquisition还有其他事情。
• 开始考虑我们的可释放性和出口性法规。从技术信息和制造能力方面，我们允许我们最亲密的盟友收到的东西非常非常保守。我们知道我们没有足够的弹药。我们可以看一下像澳大利亚这样的国家，具有能力，具有发展土著能力的预算，并与他们更紧密地合作，以确保我们拥有所需的弹药，而我们的盟友和合作伙伴也可以做到。
• 国会已经制定了允许国防部快速走的法律，并已将其转化为政策和实施指导，这意味着那里有程序。我们滞后的地方是确保我们实际上培训了如何使用这些劳动力，并鼓励我称之为创意合规性。
• We have a very risk-averse workforce that is extremely concerned about media attention or congressional hearings pointing out when things did not go well. This is leading to a group that does not want to do anything other than what there is precedent for before.
• I think we need to give the entirety of the budgets for奥塔斯就在前面，让人们快速移动。这就是国防创新部门的工作方式，并且他们能够与商业实体合作。
• The biggest concern there is that manufacturing contracts are not being handed out quickly enough. We have a long process of going through CRADAs, some very small, small business contracts. But we just need to get out there and start putting things on contract. We can do that through themiddle tier of acquisitionas well as using奥塔斯.
• Somiddle tier of acquisition, for instance, just to explain that, says if you have a commercial capability or a fielded military system, that just through an incremental investment could really give us a step function change in capability, then we do not have to go through the Joint Staff’s requirements process that can take up to 2 years. What we can do is get the leaders of military services, the Secretaries, or the leaders of agencies to document that they do have that requirement, and then we can move out on middle tier of acquisition very quickly.
• COCOMs do not have acquisition authority. They generate the demand signal. So I think a better-informed COCOM can go and speak to a service and ask specifically for what they need and how to go about and get it, and that gets back to the issue of training the workforce. And I think that is one area where the committee could help by asking the Department what they are doing to train the workforce and what they are doing in terms of keeping metrics to look at the utilization of MTAs and how that has helped to rapidly field.
• There is a huge overlap (in incentivizing industry vs overcoming hurdles with the acquisition bureaucracy) – How often does this committee have a hearing calling out and trying to understand all the fantastic opportunities of OTAs and MTA, what that did to speed up the acquisition process, what that did to help the user downrange? We need to communicate the art of the possible and then encourage it, versus admiring the problem.

Mr. Berteau

• Industry’s ability to provide defense-unique goods and services depends entirely on DoD demand. For large parts of the defense industrial base, DoD is the largest—and sometimes the only—customer.
• 在这种情况下，工业基础的规模和经济可行性将取决于国防部购买多少。
• 最近，国防部发布了一份报告，标题为：“State of Competition within the Defense Industrial Base,” in response toExecutive Order 14036: Promoting Competition in the American Economy. The report criticized defense industry for excessive consolidation but failed to acknowledge the department’s own role in that consolidation. For example, the report noted that only 3 prime contractors produce tactical missiles in the U.S. today but failed to note that DoD没有购买足够的导弹来使更多公司从事业务。
• Government contracting is among the most highly structured and controlled elements of the U.S. economy. It consistently prioritizes compliance more than it rewards results. The contracting process is managed by people who often are unconnected to the benefits from the goods and services delivered by contractors. For example, contracting officers (and other officials) are evaluated by the percentage of contract dollars that are awarded to small businesses, but they are not scored on how well those companies actually perform on the contracts they receive.
• 政府规则通常仅在完成工作之后或完成工作后要求付款。公司必须在政府发票付款之前为自己提供资金，并获得这些资金，必须提供竞争性的回报率。
• The success of contractors depends on their ability to predict the future needs of DoD, to invest resources in being ready to meet those needs when contract bids are solicited, and to maintain the commitments in those bids for the months (or years) that it takes DoD to award the contract.
• Another measure of the DIB is the number of companies that participate as prime contractors or subcontractors. A recentreport from the Center for Strategic and International Studies列举了一份或多项主要合同的总数下降，从国防部，从2009年的60,000多个到2020年的大约41,000。
• The vast majority of those companies (more than 25,000 in 2020) are small businesses, and their contracts are frequently awarded through various programs that “set aside” awards only for eligible small businesses. This does help keep small businesses going, until they outgrow their eligibility for those “set-aside” contracts. PSC analysis shows that once such companies “graduate” from small-business status, their success in winning DoD contracts drops precipitously. In other words, DoD and federal small business policies and practices punish growth rather than rewarding it.
• 国防部和任何其他代理商都没有跟踪分包商的数量。国防部在2019年估计，多达30万公司在网络安全要求涵盖的领域为国防部执行了分包合同。没有人知道不再获得主要合同的公司是否仍在国防工业基础上作为分包商。提高供应链弹性的努力将依靠分包商的一层，但国防部对这些公司的了解知之甚少，甚至不太了解使与国防部开展业务更具吸引力的原因。
• Service contracts are often so competitive that margins for successful bidders are in the low single digits. A company that realizes a 4% or 5% fee on a contract simply cannot absorb the wage cost growth of 8% or 10% that we are seeing today.
• Half of DoD contract dollars go to services, and what was once a product is often now procured as a service. From data storage to satellite launches, DoD does not need ownership to benefit. This $200+ billion services market offers unrealized potential for DoD. For example, 70 percent of DoD system costs are in life-cycle support, sustainment and operations, yet there are too few opportunities for real competition.
• 我认为，除了速度外，还有两件事，尽管在当今的环境中速度至关重要。一种是专注于结果和结果，而不是输入。我们的大部分收购过程仅集中于投入 - 劳动类别，人工小时，前端的成本 - 而不是您要获得所需的结果。第二件事是关注结果，实际上是鼓励人们冒险，实际上在赌博时不会惩罚他们。

Disclaimer:The opinions expressed here are those of the authors only and do not represent the positions of the MITRE Corporation or its sponsors.